Purchase Requisition: Meaning, Example and Value

What Is a Purchase Requisition?

A purchase requisition is a formal document that employees submit to request the purchase of goods or services. Instead of being directly sent to the supplier, the document is first approved by the managers. After approval, it is converted into a purchase order and then issued to the supplier.

Key Information to Include in Purchase Requisition

• Date of request
• Requisition number (unique identifier)
• Name & department of requester
• Detailed information on required item or service with name, quantity & SKU or item code (if any)
• Reason for requirement (product or service)
• Vendor name with address & contact number
• Estimated unit cost
• Total estimated cost
• Delivery date, delivery location, or shipping address
• Approval section with date of purchase requisition approval and authorization signature
• Supporting documentation (if any)

Purchase Requisition Example

Here, we present a purchase requisition example based on a practical scenario of a company, while assuming the details.

There is a company named Kirlin Group, whose employee Miley Finley from the marketing department raised the purchase request and filled out the purchase requisition form. The typical layout will be as follows:

What Is the Purchase Requisition Process? Key Steps Involved

Now that we understand the meaning of a purchase requisition, we will examine how it works. There are different stages in its working, including initialization, approval, PO generation, and final delivery to the vendor.

Every company has a unique strategy, and therefore, the purchase requisition process can vary according to the industry and the company’s type. A general workflow is as follows:

1. Purchase Requisition Creation

The initial step in the purchase requisition process is creating the document. The company’s employees must complete the details in the form. This can be either online or in paper form. Once the form is completed, the next step is approval.

2. Approval Process

The filled purchase requisition form is then forwarded to the responsible approval person or department for internal review. The authorized person or department approves the document once it has been thoroughly cross-checked for accuracy. The process ensures the information is highly accurate and also ensures the company has sufficient funds to pay vendors. They also check whether the requested item is necessary or not.

3. Inventory Verification

Some companies also include this step in the purchase requisition process. Once the authorities approve the document, they forward it to the person or department responsible for inventory tracking. They check to see if the items already exist in stock.

4. Approval by Purchasing Department

The purchasing department then reviews the approved purchase requisition form. If there is any shortcoming or mistake regarding the requested goods, it is then sent back to the employees for correction. In some cases, the department itself fills in the details.

5. Purchase Order Generation

When all the details are filled in the purchase requisition and the approval task is completed, the next step is to create a purchase order. This allows the requester to proceed with the purchase by sending a PO to the vendor. On acceptance by the vendor, it becomes a legally binding contract.

6. Order Delivery and Acceptance

The document is shared with the vendor or supplier in this step of the purchase requisitions process. After that, the vendor checks the document and sends the requested items as per the document. All the details are cross-checked once before generating and sending an invoice.

7. Invoice Receiving & Payment

The company receives an invoice from the vendor. The company again rechecks the details and ensures the invoice matches the purchase order. Once the details are verified as correct, the purchase order is marked as complete, and payment is sent to the vendor. This is the last step of the purchase requisition strategy.

Why Is a Purchase Requisition Important for the Business?

After unlocking the answer to what a purchase requisition is, we need to look into its value. It is a valuable document for any organization. It plays a key role in financial planning, risk mitigation, and expense control by organizing the procurement process. Here are the key reasons for using the purchase requisition in the business:

Financial Control

With a systematic purchase requisition, businesses can control their purchase expenses by limiting purchases to the necessary items. This is because a purchase request requires final approval from higher management before it can be converted into a purchase order. Thus, businesses have full control over the purchasing and do not allow employees to make purchases on their own. Hence, helpful for the finance department in managing the company’s finances.

Detect Fraud

Companies can successfully reduce the chances of fraud with a clear & well-defined purchase requisition. As the process includes document approval, it eliminates fraudulent actions in the business purchasing system. Additionally, before the process begins, the procurement team verifies whether the requisition aligns with the company’s policy.

Avoid Duplicate Orders

A purchase requisition helps companies keep track of what was ordered and what was actually purchased, especially when a centralized system is in place. The procurement team and the finance department can both easily check the purchase request with transparency. Thus, there is no chance of duplicate orders while maintaining a clear & accurate process. Additionally, the inventory management team can also verify whether the item is in stock before placing the purchasing order.

Evidence During the Audits

All the details are mentioned in the purchase requisition. Thus, it allows companies to streamline their expense and financial audits. A purchase request contains all the information relevant to the purchase. It contains every detail of the requestor, the approver(s), the approval time, and the item that was requested and approved.

Time & Cost Saver

Businesses can easily save time and money through an efficient purchase requisition process. If the company follows an automated workflow, it gives faster approval, which saves time. Additionally, this automation minimizes mistakes. Also, it is a cost-saving document because it prevents maverick spending (employees buying outside approved channels) and unauthorized purchases.

What Are the Common Challenges Involved in the Purchase Requisition?

There are certain challenges involved in the purchase requisition. These challenges are primarily related to information, the approval process, or other manual errors. Let’s understand them below:

Delay in Approval

Sometimes, purchase requisition approval gets delayed. The reason could be a lack of communication, a lack of availability of approval, or any other factor. However, this delays the entire procurement process. The result is a lack of delivery timelines and expensive purchasing, as last-minute purchases often require premium vendors.

Wrong or Incomplete Information

Missing or incorrect information in the purchase requisition form is another challenge. It results in delays of the delivery date and increases the time required for the procurement process. It is because it adds an extra step of clarification and rectification of mistakes or shortcomings.

Not Compliance With Policies

A purchase requisition that is not in compliance with the company’s policies often creates issues in the procurement process. Hence, the company must face legal action or pay the fine. The solution to overcome this challenge is to verify whether the request form aligns with the company’s policies.

Inefficient Routing

Inefficiently routed requesting documents result in errors and miscommunication. The major reason is sending the document to an inappropriate department that is not responsible for approving it. As a result, it leads to delays in the purchase requisitions process.

What are the Best Practices for Purchase Requisitions?

It is necessary to have an effective and systematic purchase requisition process. The following are the key points to consider to streamline the requisition approach:

• Always utilize a standard format to maintain consistency.
• Utilizing a purchase order template is helpful in creating a clear & professional PO.
• Keeps the approval operation transparent and clear.
• Automate the purchase requisition process wherever applicable to save time and enhance productivity.
• Adopt a strong & clear coordination and communication within the organization.
• Monitor the purchase requisition and purchase order metrics.
• Follow a centralized tool to have a systematic and centralized procurement process.

Enhance Purchase Order with Moon Invoice

As adopting digital concepts helps to streamline the procurement process, Moon Invoice is the ideal tool to incorporate them. Using the purchase order software, professionals can easily create a digital purchase order in a minute.

The predefined samples ensure accuracy and facilitate a speedy process. By entering the correct details, professionals can obtain the desired PO within seconds. Business professionals can easily make unlimited edits to the templates and quickly track the specific PO. Once the purchase order is ready, please send it to the vendor via WhatsApp or email. It is also easy to convert a PO into a bill in a single click.

Additionally, professionals can easily download the purchase order reports with one click. The platform offers third-party integrations that help automate most of the work. Hence, improving the workflow and saving time.

Time to Close Out

We hope you now have a better understanding of what a purchase requisition is. Keep in mind that it is a crucial approach for the company when it comes to purchasing products and services. Professionals must handle it carefully and maintain a clear, transparent, and concise approach. It helps businesses have a clear audit trail, prevent fraud, control spending, and increase efficiency.

Do you polish up your business purchasing process? Moon Invoice is your true partner in it. Want to try it? Here is the way!

Purchase Requisition – FAQs